Hawaii House Bill HB798

Hawaii 2023 Regular Session

• Introduced: 1/25/23
• Refer: 1/30/23
• Report Pass: 2/15/23
• Refer: 2/15/23

Caption

Relating To Nonprofit Organizations.

Impact

The bill expands the exemptions available to charitable, religious, and educational organizations, allowing these entities to retain more funds that would otherwise go towards tax obligations. The intent is to provide vital support to the nonprofit sector, which plays a critical role in delivering programs that benefit the public but currently faces challenges due to tax liabilities on fundraising activities. The legislation acknowledges the ambiguity in the existing law and attempts to clarify the relationship between state and federal provisions regarding unrelated business income.

Summary

House Bill 798 aligns Hawaii's general excise tax law with federal income tax law by exempting fundraising income generated by tax-exempt nonprofit organizations from the state's general excise tax. Currently, state law interprets fundraising income as subject to general excise tax, leading to a double taxation effect on nonprofit organizations. By making these exemptions, the bill aims to alleviate the financial burdens on nonprofits, enabling them to better deliver essential services to communities.

Sentiment

The general sentiment surrounding HB 798 appears to be positive among nonprofit organizations and their advocates, who view the bill as a necessary measure to support the critical functions of these entities. Lawmakers recognized the financial strain that current tax interpretations impose on nonprofit activities, and there is a prevailing belief that adjusting the general excise tax framework will foster a more supportive environment for charitable entities. However, there could be concerns from legislators who prioritize state revenue that may arise from these tax exemptions.

Contention

Notable points of contention may include the balance between ensuring adequate state revenue and providing financial relief to nonprofits. Some fiscal conservatives might argue that exempting fundraising income from taxation could lead to significant revenue losses for the state. The bill clearly states that it does not exempt income derived from unrelated trade or business activities, which might mitigate some concerns, but it still represents a fundamental shift in how nonprofits are taxed vis-à-vis their fundraising activities.